In today's rapidly evolving business environment, power equipment companies are increasingly looking for a "new engine" to drive growth. Mergers and acquisitions, closer proximity to the market, and brand expansion through overseas strategies have become key approaches for companies seeking international development.
The era of transformation and upgrading is upon them. With overcapacity in the domestic market, fierce competition, rising material and labor costs, more and more companies are turning their attention abroad. The question remains: how can they go global effectively? This is a pressing issue that requires immediate attention and strategic planning.
As the domestic economy slows down, the outlook for the electrical industry is not optimistic. The average annual growth rate of 30% that once defined the sector has faded. Last year saw a significant drop in orders for many companies, and although the first half of this year showed slight improvement, profit margins and selling prices have declined sharply. According to Bai Wenbo, Deputy Secretary-General of the China Electrical Equipment Industry Association, the need for transformation and overseas expansion is becoming urgent.
While going global is an inevitable trend, it is far from smooth. Entrepreneurs face numerous challenges, including capital constraints, technological limitations, investment decisions, market fluctuations, legal barriers, cultural differences, and political instability. These factors make international expansion a complex and risky endeavor.
Therefore, finding a suitable business model and identifying new sources of growth is essential for power equipment companies. Going abroad is not just about expanding markets—it's about building long-term sustainability and competitiveness on a global scale.
Since the first half of 2012, China’s electrical industry has experienced rare negative growth. Industries such as wire and cable, transformers, and fans are suffering from overcapacity, declining profits, and intensified competition. Some companies are operating with less than 50% capacity utilization, and raw material costs account for up to 70% of product prices. The phrase “Transformer on the catty†has even become a joke in the industry.
Wang Dehua, Deputy General Manager of Xi’an Xidian Transformer Co., Ltd., emphasized that the Chinese transformer industry must look beyond the domestic market and explore overseas opportunities. He pointed out that while developing the domestic market is important, expanding internationally is equally crucial.
Indeed, exploring foreign markets is not just a challenge for the transformer industry but a common necessity for the entire power equipment sector. Companies must go global to avoid shrinking in the coming years and maintain their competitive edge.
However, the path to internationalization is fraught with difficulties. The lingering effects of the financial crisis, lack of high-end competitiveness, and increasing regulatory demands make it harder for Chinese companies to succeed abroad.
Xu Xiang, President of Daquan Group, believes that going global is a natural trend. While the company aims to balance its domestic and international presence, the timeline for expansion depends on market changes. Flexible sales models, management innovations, and localization strategies are essential for success.
Going global comes with risks—policy shifts, environmental concerns, and management challenges. Although the scale of international operations will grow, profitability remains uncertain. Companies must gain experience and adapt to different markets to succeed.
Power equipment firms typically expand overseas through several methods: serving nearby markets, setting up factories near raw materials, merging with foreign companies, or acquiring international brands. Wolong Electric’s acquisition of German ATB is a successful example. Instead of sending managers to Germany, they integrated Chinese management practices and expanded further in Europe, leveraging ATB’s brand and market network to boost their global presence.
Despite these efforts, the journey remains challenging. International demand for electricity and environmental standards continues to rise, making investments costlier. At the same time, Chinese companies face additional hurdles due to Western perceptions and regulations.
Bai Wenbo notes that true success in overseas expansion requires a solid market foundation. Simply moving labor or avoiding taxes is not a sustainable strategy. Companies must focus on quality, innovation, and long-term value.
In recent years, the drop in international orders reflects both economic conditions and normal market cycles. However, the demand for high-performance electrical equipment is still growing, and the market space continues to expand. This forces Chinese companies to invest in core technologies and product quality.
Although going global involves many uncontrollable factors, it remains the only viable path for expanding into international markets. Currently, China’s exports of electrical equipment often struggle to command good prices. While some industries have reached international standards, many basic products lag behind global averages, and independent Chinese brands remain scarce.
Bai Wenbo emphasizes that the industry must act swiftly on transformation and upgrading. Xu Xiang agrees, noting that while Daquan Group is close to foreign products, it still needs time to meet international standards. Participation in events like the Hannover Industrial Fair highlights the importance of industrial upgrades and global strategies.
Wang Dehua also stresses the need for improved product quality, performance, and cost control. Developing environmentally friendly, low-loss, and reliable transformers that meet international standards is critical. Companies must also restructure sales models, enhance after-sales service, and promote their brands to successfully enter global markets.
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